Group 1 - The CFO of Qualcomm (QCOM.O) indicated that there is uncertainty regarding the impact of the global trade environment on the demand for their various business segments [1]

Report Investment Ratings - Sugar: Sideways [1] - Cotton: Sideways [1] Core Views - In the 2024/25 season, sugar mills in major producing areas except Yunnan have started to finish crushing, and a restorative increase in sugar production is a foregone conclusion. Holiday consumption during May Day has boosted sugar demand and supported stable sugar prices. Internationally, sugar production in Brazil for the 2025/26 season is gradually ramping up, but due to weather factors, sugar production is uncertain, and international sugar prices are expected to weaken sideways in the short term. Attention should be paid to the planting and growth of domestic sugarcane and sugar beets, as well as the progress of sugar production in Brazil [1]. - Due to the US tariff hikes on Chinese exports, China's textile and clothing exports have slowed down, with consumption decreasing by 200,000 tons to 7.6 million tons and imports also decreasing by 200,000 tons to 1.5 million tons. Recently, high temperatures in most parts of Xinjiang have been generally favorable for cotton sowing [1]. Data Summary Price Data - **External Market Quotes**: On April 27 - 28, 2025, the price of US sugar decreased from $18.16 to $17.83, a decline of 1.82%; the price of US cotton decreased from $68.7 to $67.56, a decline of 1.66% [3]. - **Spot Prices**: On April 27 - 28, 2025, the price of sugar in Nanning increased from 6,210 to 6,220, a rise of 0.16%; the price of sugar in Kunming increased from 6,000 to 6,070, a rise of 1.17%; the cotton index 328 decreased from 3,281 to 3,280, a decline of 0.07%; the price of cotton in Xinjiang remained unchanged at 14,000 [3]. - **Price Spreads**: From April 27 - 28, 2025, SR01 - 05 spread decreased from -343 to -362, a change of 5.54%; SR05 - 09 spread increased from 201 to 212, a change of 5.47%; SR09 - 01 spread increased from 142 to 150, a change of 5.63%; CF01 - 05 spread decreased from 500 to 480, a decline of 4.00%; CF05 - 09 spread decreased from -265 to -275, a change of 3.77%; CF09 - 01 spread increased from -235 to -205, a decline of 12.77% [3]. - **Basis**: From April 27 - 28, 2025, the basis of sugar 01 increased from 168 to 243, a rise of 44.64%; the basis of sugar 05 increased from -175 to -119, a decline of 32.00%; the basis of sugar 09 increased from 26 to 93, a rise of 257.69%; the basis of cotton 01 increased from 1,009 to 1,089, a rise of 7.93%; the basis of cotton 05 increased from 1,509 to 1,569, a rise of 3.98%; the basis of cotton 09 increased from 1,244 to 1,294, a rise of 4.02% [3]. - **Import Prices**: On April 27 - 28, 2025, the price of cotton cotlookA remained unchanged at 80.55 [3]. - **Profit Margins**: On April 27 - 28, 2025, the import profit of sugar remained unchanged at 1,295 [3]. Option Data - The implied volatility of SR509C6000 is 0.1097, and the historical volatility of its futures underlying SR509 is 8.88; the implied volatility of SR509P6000 is 0.1084 [3]. - The implied volatility of CF509C13000 is 0.1271, and the historical volatility of its futures underlying CF509 is 11.77; the implied volatility of CF509P13000 is 0.1281 [3]. Warehouse Receipt Data - On April 27 - 28, 2025, the number of sugar warehouse receipts remained unchanged at 28,756; the number of cotton warehouse receipts decreased from 10,555 to 10,479, a decline of 0.72% [3].

Financial Data and Key Metrics Changes - The company achieved record first-quarter sales of $2.41 billion, a 7.1% increase year-over-year, and $2.46 billion on a constant currency basis, up 9% [8][27] - Earnings per share were $1.34, essentially flat compared to the prior year [34] - Gross margin was 52%, down 50 basis points from the previous year, primarily due to lower average selling prices from higher promotions in certain markets [31] Business Line Data and Key Metrics Changes - Direct-to-consumer sales grew 6% year-over-year to $879.4 million, with domestic growth of 11% driven by strong e-commerce performance [27][17] - Wholesale sales increased 7.8% year-over-year to $1.53 billion, with international sales up 9.5% [28][16] - The company ended the quarter with 5,318 Skechers stores worldwide, including 1,821 company-owned locations [18] Market Data and Key Metrics Changes - Domestic and international sales both increased by 7%, with EMEA growing 14% and The Americas growing 8.3% [9][14] - In the Asia Pacific region, sales decreased by 2.6%, primarily due to soft consumer spending in China, but grew 12% when excluding China [10][30] Company Strategy and Development Direction - The company views international markets as its primary growth engine, investing in retail store networks and enhancing distribution efficiencies [10][21] - Skechers aims to expand its distribution centers in the U.S., China, and Europe to manage expected growth and improve delivery efficiency [20][21] - The company is focused on evolving and innovating its footwear to meet consumer needs and drive demand globally [21][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increasing macroeconomic uncertainty and waning consumer sentiment but expressed confidence in navigating these challenges [9][26] - The company remains committed to its strategic plan and believes it is well-positioned to thrive despite current market dynamics [26][42] - Management did not provide specific revenue or earnings guidance due to the dynamic environment but remains optimistic about growth opportunities [39][38] Other Important Information - Inventory increased by 30% year-over-year to $1.77 billion, primarily due to elongated transit times, but decreased by 7.6% compared to the prior quarter [35][36] - Capital expenditures for the quarter were $147.1 million, focusing on distribution infrastructure and new store openings [36] Q&A Session Summary Question: Can you discuss the company's production in China and tariff strategies? - Management emphasized that they are looking at sourcing optimization, vendor cost sharing, and pricing adjustments to manage tariffs, with two-thirds of the business being outside the U.S. [49][51] Question: What markets are experiencing notable volatility? - The U.S. and China are noted as presenting the most uncertainty, with robust consumer demand for Skechers products remaining strong in most other markets [60][62] Question: How do you view the potential for price increases in response to tariffs? - Management indicated that pricing is being considered but will depend on consumer receptiveness and the overall impact on the business [78][80] Question: What is the company's approach to inventory management amidst tariff changes? - The company is managing inventory closely, with a focus on minimizing at-risk inventory and ensuring high fidelity to delivery [97][99] Question: Are there specific products that are currently made in China and not in Vietnam? - Management noted that most kids' footwear is produced in China due to quality and cost considerations, but they have the ability to back up production in multiple locations [145]